Municipals get boost from weaker economic data; Pennsylvania Turnpike brings $300.6 million

By Sheri Kasprzak

New York, April 23 - Municipals saw a firmer tone on Wednesday as the busy primary market continued, following suit with Treasuries after some weak home sales data, market insider said.

A trader Wednesday pegged short bond yields at a basis point lower and long bond yields lower by as much as 4 bps. Yields in the middle of the curve were seen about 2 bps to 3 bps lower.

"We are seeing some decent trading activity, possibly due to the recent influx of deals," the trader said.

"Still, I think the focus has been primary. Yields are primarily moving along with Treasuries."

Treasury yields dropped across the board Wednesday after disappointing new single-family home sales data was released.

The 10-year Treasury note yield fell by 4 bps to end the day at 2.688%. The five-year note yield, which rose on Tuesday, fell by 3 bps to close at 1.714%. The 30-year bond yield fell by 3.5 bps to 3.469%.

Sales of new single-family homes fell to 384,000 in March on a seasonally adjusted annual rate, said a report released by the U.S. Census Bureau and the Department of Housing and Urban Development. This marks a 14.5% decline over February's revised 449,000 number and 13.3% below the March 2013 estimate of 443,000.

Pennsylvania Turnpike prices

In Wednesday's primary action, the Pennsylvania Turnpike Commission brought to market $300.6 million of series 2014A revenue bonds. The deal was upsized from $209.8 million.

The offering included $108.05 million of series 2014A-1 turnpike revenue bonds (//A-), $42,155,000 of series 2014A-2 capital appreciation bonds, $65,455,000 of series 2014A-3 capital appreciation bonds and $84.94 million of series 2014A convertible capital appreciation bonds, said a pricing sheet.

The 2014A-1 bonds are due 2014 to 2034 with term bonds due in 2038 and 2043. The serial coupons range from 2% to 5% with 0.36% to 4.22% yields. The 2038 bonds have a 5% coupon and priced at 105.813 to yield 4.31%, and the 2044 bonds have a 5% coupon and priced at 105.031 to yield 4.40%.

The 2014A-2 bonds are due 2039 to 2040 with 0% coupons and yields from 5.14% to 5.16%.

The 2014A-3 bonds are due 2040 to 2042 with 0% coupons and yields from 5.25% to 5.44%.

The 2014A convertible capital appreciation bonds are due 2034, 2037 and 2044. All the bonds have a 0% coupon. The 2034 bonds have a 4.56% yield, the 2037 bonds have a 4.62% yield and a 4.77% yield, and the 2044 bonds have a 4.95% yield.

Morgan Stanley & Co. LLC was the senior manager.

Proceeds will be used to finance turnpike capital projects.

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